In response to calls by major shareholder LIM Advisors to have the China Growth Fund (AGF) wound up, responsible entity AMP Capital's chairman, Adam Tindall, pointed to analysis that has shown the fund is, in fact, ‘fit for purpose’.
The finding was part of a 2016 strategic review of AGF, released on 20 May, that was conducted by AMP Capital’s advisory committee.
Mr Tindall added that a majority of the 700 unit holders AMP Capital consulted in early 2016 were “in favour of keeping the fund in its present form”.
“As the responsible entity [RE] of AGF, AMP Capital has always acted and will continue to act in the best interest of all unitholders in the fund, not just those of a single investor regardless of its size,” he said.
LIM Advisors is concerned that AGF has traded at an average discount to net asset value (NAV) of 20 per cent since the fund’s launch in December 2005.
However, the 2016 strategic review indicated that the discount to NAV of AGF is less than that of its comparable peers – namely, the HSBC China Dragon Fund and the Morgan Stanley China A-Share Fund.
Furthermore, the combination of regulatory and tax uncertainty in mainland China could complicate the repatriation of China A shares.
InvestorDaily understands it could take as long as two years for unit holders to receive their money in the event of a wind-up of AGF.
After considering “more than 40” options – including the wind-up of the fund – AMP Capital has selected eight ‘enhancements’ that will be put to unit holders in the 28 July extraordinary general meeting.
Among the enhancements is a proposal to reduce AGF’s base management fee to 1.35 per cent, down from 1.65 per cent per annum.
AMP Capital has also proposed a one-off capital management opportunity that would consist of a one-off redemption of up to 15 per cent of units on issue and an on-market buy-back of up to 5 per cent of the units on issue over a 12-month period.
In addition to AMP Capital’s eight proposed enhancements to the operation of the fund, unit holders will also vote on 28 July on a LIM Advisors resolution to wind up the fund.
If the ‘LIM Resolution’ is approved, AMP Capital will terminate and wind up the fund in accordance with the constitution and the Corporations Act.
“The RE would not, in those circumstances, implement the enhancements (including the capital management opportunity,” said AMP Capital.
AMP Capital intends to release a notice of meeting and accompanying explanatory memorandum in relation to the 28 July meeting at the end of June.
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